Wednesday’s Best S&P Turning Points Results: The short suggestion ran 16.25 points with only 2 ticks adverse move.
Quick Tip: Entry Finesse
The Volume Profile strategy we trade is proprietary. We’re looking for levels on the price axis, where spikes in trading volume occurred historically.
One nice feature of this method is we know in advance where the high probability turning points are located. This means we can place orders in advance.
The risk on the chart above was 4.75 points. If you wanted to limit your risk and not reduce your position size you might be tempted to place the order deeper in the level.
Here’s why that’s not the best idea. Notice on the chart of yesterday’s short idea that price only went 2 ticks against before delivering a decent winner. We know from hard evidence (>12,000 entries in all market conditions) that price will move against by 1 point...
Tuesday’s Best S&P Turning Points Results: The suggested buy @ 3689.00 ran for 28.75 points.
Quick Tip: Great Job!
Your focus when trading should be on doing the job well. That doesn’t mean winning. You can do your job well and lose. Why? Because we have no control over the outcome, only our behavior.
Here are your main “job” components as a trader: Research, practice, preparation, execution, and review.
There are plenty of analogies that compare traders with athletes, musicians, artists, and the military. These are all considered Performance activities. So is trading. Think about how much effort the successful of those put into these same “job” components.
I’ve found the definitive work on this subject is in Dr. Brett Steenbarger’s book Enhancing Trader Performance. In fact, his publisher could have named it the Trader’s Bible, but there...
Monday’s Best S&P Turning Points Results: The suggested short at 3731.00 picked the top of the session but missed filling by 2 ticks.
Quick Tip: Near Misses
Your control in trading is limited to your behavior. You can control entry, exit, risk, and to some extent, reward.
Yesterday was planned well. Price rallied to a key volume level where shorting had edge. The beauty of this type of entry is it can be placed in advance.
Unfortunately, the rally stopped 2 ticks shy of the entry and missed a 59-point plunge to the close.
How do you feel about that? Frustrated? Hopeless? Here’s a better idea, feel encouraged! The strategy worked, just not perfectly. Find the positive view.
The World Sentiment Index: (+100/-100) JUMPS from -57 to +36 in a bullish leaning world. Historically the market closed higher from the open 55% of the time with drops 20% larger than gains.
Catalysts: Powell @...
Thursday’s Best S&P Turning Points Results: Neither trade suggestion triggered.
Quick Tip: Moving Stops
Unless you’re a prop shop pro scalping with hundreds of contracts you should be placing stop loss orders with every trade. Mental stops mess with your emotions and tie you to the screen.
Once you’re in the trade, the decisions become a) do you move the stop, b) when, c) and to where.
I know successful traders that have opposing views on this subject. The correct answer is not simple, though. You must take it in context. You need to know their trading style and risk tolerance to truly understand their answer.
Trader A enters momentum moves and adds to his position as price goes in his direction. He trails his stop based on chart features and volatility.
Trader B trades a reversal strategy that anticipates a turning point relatively far away. He understands the spiky nature of his asset and chooses to...
Wednesday’s Best S&P Turning Points Results: Neither trade suggestion triggered.
Quick Tip: Experiment More
Imagine you’re attending a trading conference. You’re one of hundreds of traders watching the presentations, talking to vendors at their booths, always looking for some new edge to add to your plan.
If you asked everyone you met, and they were honest and transparent with their answers, “What tools do you use to trade?”
Here’s what you’d hear: Price action, chart patterns, fundamentals, supply/demand, moving averages, volume, RSI, MACD, CCI, ATR, Stochastics, Bollinger bands, ad infinitum.
The fact is, other than fundamentals, they are all looking at the same core variables; price, time, volume, displayed differently.
You’d likely hear discussions among them about why their tools are better. And everyone would be right! Their tools are better… ...
Tuesday’s Best S&P Turning Points Results: Neither trade suggestion triggered.
Quick Tip: FOMC Trading
The most effective habit a trader can develop is detailed review. Journaling, watch recordings, data capture. Do it all every day. Think of yourself as a professional athlete. Your coach would have you watching films of your performance.
Today is FOMC day. This is an ideal time to look back and review the S&P price action on prior FOMC days. The pattern tends to be range-bound before the announcement and spiky afterward. This should help your trade selection and planning. In fact, if you have solid historical data on your strategy’s performance on FOMC day you might not trade at all. It’s always better to have some probabilities at hand. Keep accurate records whether you took the trades or not.
The announcement releases at 2PM ET. You might think the highest volatility is within the 30-minute interval...
Monday’s Best S&P Turning Points Results: Neither suggested setup triggered.
Quick Tip: Niche Trading
Dr. Brett Steenbarger, in his book Enhancing Trader Performance (must read), writes about the importance of FIRST finding your niche in trading.
Too many new traders spend their time and money trying to find a strategy or indicator that makes money. They think that’s all there is to trading successfully.
The more basic and important aspect is style. What style of trading resonates with you. There are so many different markets, timeframes, and styles to trade. If you could experiment with several different “niches” you’d be way better off than simply trading just like the guy in the YouTube video.
For example, our trading room runs 5 different strategies. No one trades them all. And within each I’m sure there are nuances that each trader attaches to their personalized trade plan. There...
Friday’s Best S&P Turning Points Results: Neither trade triggered on a relatively narrow, range-bound day.
Quick Tip: Choices
Market conditions change constantly. This means your strategy will either offer plenty of trade opportunities or very few. Having skill running multiple strategies is the answer to abundance, and that is the foundation of consistency.
For example, the Volume Profile strategy that is highlighted in this newsletter every day had only 3 setups trigger on Friday, one small winner. And that included the Globex session the night before. A wider range day would have solved that.
The Volatility Reversal strategy, which prefers range-bound days, offered 7 setups with 5 winners.
The Trend/Momentum strategy, most active every day, offered 33 setups with 18 winners.
SPX Credit Spreads had ideal market conditions.
This is not to say that you would take...
Thursday’s Best S&P Turning Points Results: The short breakout below 3925.50 stopped out.
Quick Tip: Losing streaks…
It’s Friday and likely this will be a losing week for me… and I’m unconcerned.
Losing should not affect you financially or psychologically. You’ve determined how much you can lose before you react emotionally, and you’re disciplined to limit your loss to that number on every trade. If not, you’re destined to fail.
That risk number can change. You can increase it when you’re doing well and decrease it when not. A common formula for that change in risk is the Fixed Percentage rule. Simply this: risk the same percentage of your trading account on each trade, usually no more than 2%. This way you’ll risk more and gain more as the account grows and vice versa.
But what if you do get anxious or upset in a losing streak?...
Tuesday’s Best S&P Turning Points Results: The suggested buy level was cancelled due to the CPI release.
Quick Tip: No Gambling
After trading for 23 years and teaching trading for 14 years you know the top 3 questions you’ll hear when you say you’re a trader:
Q. Where’s the market going?
A. I don’t know.
Q. Any good stock tips?
Q. Isn’t trading gambling?
At this point they’re curious and confused. If I don’t know where the market is headed, and I don’t have a good stock tip, and what looks like a crapshoot isn’t, then what is it that a trader does do?
Traders find opportunities in the market where the probability of success is in their favor. It’s not gambling. It’s more like being the casino, which is a highly profitable business.
But the main difference between being a trader...